Personal injury firms are ignoring existing rules in their efforts to comply with the referral fee ban, the SRA has discovered. 

The regulator this week issued what it called a ‘warning note’ after finding ‘numerous examples’ of firms breaching the code of conduct after changing their business model to deal with the ban.

The warning follows a review of the first six months of the ban. Examples of the type of issues raised include:

  • Firms agreeing with an introducer to deduct money from clients’ damages
  • Inappropriate outsourcing of work to introducers and lack of transparency about the arrangement
  • Referrals to other service providers which are not in the best interests of clients
  • Failure to advise clients properly about the costs and how their claim should be funded.

Richard Collins, SRA executive director, said that while firms have done a lot to comply with the ban, it should not reduce the need to continue to ensure compliance with other principles.

‘Worryingly, we are beginning to see some examples of firms that - in their desire to maintain a volume of new clients in a manner compliant with the referral fee ban - have not paid sufficient attention to compliance with the broader, and longstanding, regulatory requirements regarding referral.’

The SRA said it continues to take a ‘measured approach’ to enforcing the ban, focusing on supervision to make sure firms are compliant.

Where there are ‘significant concerns’, however, the regulator said it will work with the Ministry of Justice and Financial Conduct Authority to share information.

‘Of course we will take formal enforcement action against any firm flagrantly breaching the rules,’ added Collins. ‘Those unwilling to change their practices and who fail to co-operate will face action.'